Home loans hit an 11-month high

The number of mortgage approvals has risen – but not to the benefit of first
time buyers.

The number of home loan approvals reached the highest level since January

By Lara May

7:00AM GMT 14 Dec 2012

House purchase lending in November increased to its highest level for eleven months, according to e. surv chartered surveyors, but few of these loans are reaching first time buyers. Their research revealed there were 53,259 house purchase loans in November, the highest since January, and there was an increase of 1pc between October and November. However banks are choosing to focus an improvement in mortgage funding on wealthier borrowers rather than first time buyers, in order to reduce the risk factor.

First-timers buyers were less lucky in November, with purchase approvals on properties below £125,000 accounting for just 22pc of overall house purchase lending, constituting the lowest proportion for 14 months. Moreover, lending to borrowers with small deposits – a good barometer for the health of the first-time buyer market – slipped to its lowest since July 2011. Loans to borrowers with a deposit of less than 15pc accounted for just one in eleven of total house purchase loans in November, with just 4,847 loans compared to 7,180 last November, a drop of 33pc.

This development has occurred despite the government’s Funding for Lending scheme, which boosted lenders’ mortgage credit over the fourth quarter. The FLS has lowered mortgage rates but banks are still more inclined to opt for lower risk low loan-to-value (LTV) borrowers. Thus, the average LTV on property below £125,000 (typical first-timer property) fell to 66pc in November, the lowest since February 2011, indicating only first-time buyers with plenty of equity were able to get a house purchase loan.

In contrast, banks focused on lending more to wealthier buyers with house purchase loans rising on all property valued at over £500,000, notably in the £500,000 to £750,000 bracket.

Richard Sexton, of e. surv, said: “The slight improvement in overall lending glosses over the ongoing struggles of first-time buyers. High LTV lending is a third lower than it was this time last year, which suggests things remain challenging for new buyers. Mindful of their risk profile and capital adequacy requirements, lenders appear to be focusing increased lending on relatively wealthy borrowers.”